Funds Flow Statement Analysis, Uses & Benefits of Funds Flow Statement

Contents Definition of Fund Flow Statement, Objectives, Limitations Importance of the Cash Flow Statement Why is the Cash Flow Statement Important to Shareholders and Investors? Definition of Fund Flow Statements Objectives Limitation Uses of Funds Flow Statement Like the other financial statements, the Cash Flow Statement is also usually drawn up annually, but it can be drawn up more often, if required. A Funds-Flow Statement on the other hand deals with the long-term nature of the funds, its application as well as the position of the working capital and its impact on the organisation. This further determines the financial situation of the entity and enables a correct allocation of its funds. It is a crucial factor leading to healthy financial planning. The statement doesn’t add any new numerical value to a company’s financial standing. This information helps the organization to spend the money within the budget. Accounts payable, amortization and depreciation are also considered while calculating cash flow from operations. It helps the management to take policy decisions and to decide about the financing policies and Capital Expenditure for the future. Alance sheet in order judge the financial position of the company in a better way. This is so because statement of profit and loss incorporates the effects of all operating activities of an enterprise. In simpler terms, operating cash flow is the amount of cash generated from a company’s regular operations. It estimates how much cash flow is made by the company’s normal functioning. For example, the retail stores earn their operating cash flow from the difference between the sale price of an item and how much it...